Winning in the Age of Bohonomics

Archive for the tag “hypercompetition”

Financial Times Lexicon defines hypercompetition in a following way: ”A situation in which there is a lot of very strong competition between companies, markets are changing very quickly, and it is easy to enter a new market, so that it is not possible for one company to keep a competitive advantage for a long time”. (See http://lexicon.ft.com/Term?term=hypercompetition). Many economists have noted that hypercompetition leads markets to unstable conditions. Theories of general equilibrium in markets and automatic stabilization of markets do not hold, if markets are in unstable conditions. Richard A. D’aveni introduced this concept to scientific discussion of company and corporate theories. His book “Hypercompetition” is a classic book in the international management literature. One key statement of his book was that competitive advantage can no longer be sustained.

Hypercompetition results from the dynamics of strategic maneuvering amongst many competitors. It is the condition of rapid escalation of competition based on price-quality positioning.

Corporations and companies want to use other tools to compete under conditions of hypercompetition. They do not want to start price wars. In such conditions corporations want to be Cost & Quality (C-Q)-leaders or followers. They may want to create Timing and Know-How (T-K)-Value chains and build new efficiencies. In some case they may rely on Strongholds (S)-Core or on Distinctive Competencies. Deep pockets strategy is based on the availability of financial capital. (see http://blogs.msdn.com/b/archetype/archive/2006/07/24/677222.aspx).

To escape disastrous price wars, modern companies try to occupy different locations on the price like brand strategies, offering mass customization, quality axis, using micro-marketing, and shifting strategies based on the changing anatomy of industry trends.

To sum up, new arenas of hypercompetition are:

Cost & Quality (C-Q),

Timing and Know-How (T-K),

Strongholds (S), and

Deep pockets (D).

Hypercompetition is emphasized on several occasions – in particular, in the creative economy in the context of organizational development. Success is based on the fast changes in hypercompetitive business environment. Agents and leaders must change rapidly and understand and internalize weak signals in their decision environment. For a company to stay alive and competitive it must very innovative. It mean that a company delivers novel and advanced products and services for which there is little or no equal in the marketplace. Commodity differentiation and branding are key aspects of hypercompetition. Hypercompetition is focused on is new ideas, inventions and innovations.

Now many experts have started discuss about hybrid economy. What is hybrid economy? How it is connected to hypercompetition? A hybrid economy is any type of local, state, or national economic system that involves a more or less equal focus on two or more different types of economy.

This hybrid economy model is a relatively common structure that has been utilized in many different settings over the history of humankind. For example, in traditional agricultural society there were exchange and storage economies. Some examples of a hybrid economy may include a creative economy, a military-industrial based economy, a university-industry based economy, or hybrid economy based primarily on a mix of business and government. Thus, there are various forms of hybrid economy. New forms of hybrid economy include typically e-business and internet economics.

These forms of hybrid economies are not fitting well to pure exchange mechanisms of market economy. The reason for the existence of hybrid economies is that they promote stable systemic mechanisms than market economy or unstable hypercompetition. The element of public good is typical for hybrid economies. We can even claim that in the future we need more elements of hybrid economies to make capitalism work better. If we want that capitalism delivers benefits and positive values to everyone, there is need to develop more innovative patterns for the hybrid economy. New forms of hybrid economy can also include dynamic elements of social innovation.

The transition to a hybrid model of competition does not mean that the market would disappear, and markets would not be relevant for transaction mechanisms. This is something that should be emphasized. Also hybrid economy is based on competition. Hybrid competition is a very important new element in the global hypercompetition. Hybrid competition is also connected to good governance systems and to trust of democratic agencies and institutions.

We can take a number of reasons why the hybrid competition has risen and continues to rise as an important part of people´s and organizations´ wealth creation processes:

• Globalisation and its associated cultural interactions;

• The penetration of the Internet and related digital networking;

• Digital technology innovations (Web 2.0, Web 3.0 and Web 4.0 etc.);

• Pressures and unstable processes of the hypercompetition;

• Ubiquitous r/evolution, the Internet of Things and other digital forms of evolution like Cloud Computing and Big Data), and

The global economy means a new division of labor in the world. Workplaces are lost in some countries and regions and in some other places people are creating new jobs.

Frequently asked question is what kind of new work places can be created after old work places are lost? One obvious answer is: “Something else”. People have always developed something else after the loss of permanent jobs. The big problem is that it may take too much time to find new jobs, if we do not make systemic changes to the postmodern societies.

If we rely only on the hypercompetition and market mechanism, our societies will be very unstable and cause a lot of social losses. If we really can develop new social innovations and new forms of hybrid economy, we can expect that social and economic transition processes will be faster, less unstable and cause less welfare losses.

Today we must allow multiple stakeholders to negotiate over how to attain a desirable future. Developing new innovative forms of hybrid economy will require new forms of dialogue and debates. The only option is not unstable hypercompetition, which mostly delivers benefits of exchange and markets unethically and unequally.

It is worth of underlining that people create their economies and systems of governance. It is worth of noting that in capitalism people are allowed to think freely. These two things are relevant if we want to save capitalism and re-invent it as a dynamic form of global governance.